Teaching your teen about good money mind-sets and management is the easiest way to help them succeed (and not live at home forever!).

People often lament that they were never taught how to manage their finances at school. No one teaches teenagers about how bad debt is, why savings are important, or how to get a mortgage, or navigate financial contracts. There is also so much emotion involved with money; people need to learn money skills and remove emotion from the equation. And this, as a parent, is your job.

Pew Research says that a third of adults from 18-34 years old live with their parents, and more than half of them get financial assistance from their parents. While it can be OK sometimes, such as saving for a deposit on a home or if they need support with young kids, is this a scenario you want for yourself, adult children still living at home while you’re retired?

Teaching your teen great basic financial skills is the best way to encourage their independence and future financial freedom. Not doing so can lead to unhealthy dependence patterns and expectations that you’ll support them and bail them out forever. Research shows that economically advantaged homes are more likely to be propping up their kids than poorer families. While this seemingly provides an early advantage, a staggering 70% of wealthy families  lose their wealth by the next generation. Your teen really does need to know about money management!

How can you teach your kids good financial skills?

Make Money Matters as Common as Discussions About Messy Bedrooms

Encourage your teen to talk about money. Don’t try to shut down conversations about income or mortgages but explain things as best you can. Avoid saying things like ‘we can’t afford that’, but instead say things like ‘let’s see if we can fit that into the budget this month’. Money is not inherently bad or good, and it’s not a dirty word.

Use Teachable Moments

Particularly as teenagers start to gain independence, there are many teachable moments. This means taking advantage of opportunities as they arise—after all, teenagers don’t actually want to listen to their parents—and explain how taxes are paid from wages, how interest rates affect their savings or how mortgages are set up.

Watching TV with them often provides lots of opportunities. Or, at the dinner table, discuss what’s happening with the stock and housing market, or the exchange rate, or inflation – the topics are almost limitless. Be open to answering questions as best as you can (and utilizing Google when you truly don’t know).

Get Them to Set Goals and Plan

Whether their goals might be a trip to the Gold Coast or buying a high end graphics card, it is part of your job to show them how to get there. What are their short and long term dreams? How much money might they need to get there? Can you create a spreadsheet together and show how money adds up towards that?

Enable Them to Do Their Own Research

There are some amazing Instagram accounts and other influencers that offer great advice. While teens might not want to listen to you, scrolling through Insta or TikTok might let them inadvertently learn something useful.

Set Them Up for Success

Get them set up for a savings account, teach them about good budgets (not those super tight ones where you can’t spend an extra cent), help them plan goals and how to achieve them. If they will listen to you for long enough, show them how compounding interest works in their favour, or how credit cards steal all your money in interest.

Also, tell them about your financial limitations for them. What are your expectations of them? How much support can they expect from you? Can they live with you until you turn 80? Or are you happy to be co-signer if and when they get a mortgage? Who pays for petrol, or cellphone bills?

Be Aware that Females are Disadvantaged

Women, historically, have not had to manage their own finances. There’s also the patently wrong stereotype that women are bad at maths. This can result in women having lower confidence levels in managing their own finances. The best plan of attack here is to tell them these problems exist, how nonsensical they are, and then get them to follow some amazing female finance influencers.

What NOT To Do

Teenagers are tricky to teach—they are smart, but they know everything, and you as a parent are fast losing your status as ‘knower of all things’.

• Don’t exaggerate. Young adults know when you’re being unrealistic or lying. Also, it is time to be honest with your kids; you probably don’t know everything, and you’ve made financial mistakes too.
• Don’t try to scare them. Negative fear tactics don’t work. Teenagers thrive on danger, and have very short-term vision. Dire warnings about lack of retirement funds are hundreds of years away and are unrelatable.
• Don’t be too tough. They do have to make their own mistakes in life. Taking over complete control of their finances is not going to teach them anything. And while you shouldn’t be bailing them out all the time, sometimes they might need a hand- like getting a bond for their first flat together, or buying something expensive like their first car.

Get Them Help If They Need It

If you made way too many financial mistakes yourself, or you truly feel like you’re floundering around yourself, don’t let your bad habits rub off on them. Speak to your financial advisor about what they tell their kids; take their learnings back home to yours.